I should note from the very beginning that I am not telling you to invest in cryptocurrencies, and I am not saying that the advice that I will give you will make you any money. You should never invest any more money than the amount you can afford to lose. I personally have seen an increase in my investment in cryptocurrencies, and it has been a super return in a short amount of time, but it is a volatile market and I hope that you think long and hard prior to investing your hard earned money. With that said, I would love to tell you more about investing short term!
With that said, there are several things to consider when you want to day trade cryptocurrencies:
The market cap of a company is basically the cost per “unit” or coin, multiplied by the total number of “units” or coins that are available to buy. A company with a larger market cap usually has more assets, capital to work with, and a higher revenue that a company with a smaller market cap. Trust is usually associated with a larger market cap, which in turn usually results in a safer investment from an investor perspective. This shouldn’t be the sole determining factor in deciding whether to invest in a company as a higher market cap doesn’t necessarily mean that the company is better than a company with a smaller market cap. Lots of other factors come into play than market cap alone, but it’s good information to keep in the forefront of your mind when deciding whether to buy a company’s coins.
If you’ve ever wondered what the trading volume of a company is, or why it’s important, you are not alone. In order to calculate the trading volume of a cryptocurrency, you basically need to add together the total number of coins being bought and sold for the day. The good news is that most, if not all, of the websites that you will use to buy and sell cryptocurrencies will have this totaled for you, and it is usually updated in real time so you can see the volume at any given time within the last 24 hours. As an example, Ripple (XRP) has a trading volume of approximately 166,000 Ethereum as this article is being written, translated into US dollars based on the current price of Ethereum ($985~) is approximately $163,676,000 USD worth of Ripple is being bought and sold within the last 24 hour period. This does instill confidence in an investor because an active cryptocurrency is likely to be more stable than a cryptocurrency that only has 1,000 Ether being bought and sold within a 24 hour period of time. Traditionally, the more activity the better if you plan to day trade cryptocurrencies because there will be a quicker fluctuation rather than a slower fluctuation and you will be able to capitalize on quick gains daily rather than waiting for a week to see any type of profit or loss.
Now, for the non-day trader, and a long term cryptocurrency investor if you feel that a cryptocurrency with a low volume of trading has great potential, put some money you can afford to lose into it, leave it there and wait for a few years until it can be discovered by others and then watch your return start to rise.
This means basically what it sounds like it means. These numbers will tell you what the cryptocurrency traded at when it was at its absolutely lowest amount, and what it traded at when it was at its absolutely highest amount, over the last 24-hour period of time. This information is particularly useful for a day trader because it’s less likely a day trader would be interested in getting in when the value of the cryptocurrency is at it’s highest peak, rather than it’s lowest low. A day trader would be more interested in buying the cryptocurrency when the price nears or hits the 24-hour low, then when the price gets near the 24-hour high, or hits it, a day trader would likely sell and then re-buy again when the price dips again. One scary thing for a day trader, however, is that when you sell high, if the price continues to skyrocket up, then you won’t be able to get back in. In the case of XRP, this is of huge concern because the anticipation is that the price will continue to go to the moon.